A
ABA American Bankers Association
ABA Transit Routing Number
A nine-digit number assigned to identify the financial institution or bank associated with a
customer's bank account.
ACH Transaction
A payment processed via the ACH Network. Those involved are (1) the Originator (merchant),
(2) the Third-Party Processor, (3) the Originating Depository Financial Institution (ODFI),
(4) the ACH Network, (5) the Receiving Depository Financial Institution (RDFI), and (6) the
Receiver.
Acquirer
A financial institution or Merchant Service Provider (MSP) that manages credit card processing
on behalf of a customers.
Acquiring Bank
The merchant's bank account that is used for deposits for credit card processing.
Address Verification Service (AVS)
A database system used to verify consumer billing addresses. Merchants may then accept or
decline transactions based on the validity of the billing address information provided by the
customer at the point of sale. Many times a shipping address will not coincide with the billing
address. It is up to each merchant to investigate further and conclude whether to accept or
decline the transaction.
Application Program Interface (API)
A communication protocol that facilitates the transfer of or access to information between two
separate software or computer applications.
Authentication
A procedure to verify the identity of a customer. Authentications vary, depending on the point
of sale. For e-commerce many sites require a customer login and password. For brick and mortar
establishments, this could entail a photo ID such as a driver's license.
Authorization
NACHA requires all authorizations to be securely stored for 2 years after the sale date. For TEL
merchants, this can be in the form of a recording or written notification. For WEB, it is the raw
data captured during the sales. PPD is the signed authorization prior to initiating the debit or
credit transaction.
Authorization Request
A transaction request submitted by a financial institution or third-party processor to verify
that the sale was authorized in compliance with the NACHA rules and Regulations
B
Batch
A group of transactions usually formatted as a text file or comma delimited (.csv) file. This
allows many transactions to be submitted and processed at once, therefore, eliminating
single-entry submissions. Batch files are commonly used by call centers and fulfillment centers
since they tend to have high volume. Easy and convenient, this is many merchants number one
choice for processing their transactions.
BOC
The standard code for Back Office Conversion transactions transmitted by the ACH.
Brick and Mortar
Merchants that operate in storefront or physical locations
C
Call Center
An establishment that takes telephone orders and forwards them either directly to the merchant
or to a fulfillment center. Common uses are DRTV (Direct TV) and Radio Broadcast campaigns.
Card Not Present
This generally refers to e-commerce and indicates that the card is not physically present at
the time of sale.
Card Present
Generally refers to retail or Brick and Mortar establishments and indicates that the physical
card is present. In the card present environment, a card reader is employed and the card is
swiped at the point of sale.
Card Reader
A hardware device that reads and transmits payment information stored in the magnetic stripe on
a credit, debit or stored-value card.
Cardholder Dispute
A cardholder claiming that an unauthorized purchase was performed on his or her credit card.
Cash Concentration or Disbursement (CCD)
A charge or refund against a business checking account.
Chargeback
This is signed under "Penalty of Perjury" at the consumer's bank and is returned as an R07, R29
or R10. The consumer claims that the purchase or transaction was not authorized and that the
consumer had no knowledge to the transaction. This is a common response to cases of fraud and
Identity theft.
Check 21
Defined as Check Truncation Act of the 21st Century, Check 21 allows merchants to submit checks
or bank account information electronically instead of processing paper checks.
Check Verification
A tool that runs checking information through a negative database alerting merchants to customers
who have a bad history or who have initiated chargeback's in the past. A superb risk management
tool.
Customer ID
A unique identification assigned to each customer
Customer IP Address
Indicates the Internet Protocol (IP) address of a customer's Web browser, or the IP address from
which a transaction is submitted.
D
Declined
Transactions that are not approved usually due to invalid routing or account numbers
Direct Deposit
Initiates credits from a company payroll account to an employee's personal account for the net
amount of the period's paycheck. SEC (standard Entry Class) code is always PPD.
E
Electronic Funds Transfer Act
The United States federal law that governs the use and administration of electronic funds
transfer services.
Electronic Signatures in Global and National Commerce Act (E-SIGN)
A federal law that defines and governs the use of digital signatures and records in electronic
commerce.
I
Independent Sales Organization (ISO)
An organization that sells products or services to merchants for various types of merchant
service providers.
Internet-Initiated Entry (WEB)
A payment or purchase made over the internet. This is also referred to as e-commerce
Invoice Number
A unique identification value assigned to a transaction.
M
Magnetic Stripe
The black stripe on a credit, debit or stored-value card that stores the cardholder's account or
payment information.
Mail Order/Telephone Order (MOTO)
Point of sale generates from mail or telephone initiated orders.
Minimum Monthly Fee
A monthly service charge applied to an account that does not meet or go above the monthly minimum
assigned. For example, if the merchant's Minimum Monthly Fee is $100.00, and the merchant's
processing fees totals $75.00, the merchant will be charged an additional $25.00 to make up the
difference.
N
National Automated Clearing House Association (NACHA)
NACHA is the national trade association that establishes the rules, standards, and procedures
governing the exchange of ACH transactions between participating banks (Originating Depository
Financial Institutions and Receiving Depository Financial Institutions).
Not Sufficient Funds (NSF)
An ACH return (R01) indicating that a consumer's account does not have sufficient funds to cover
a specific transaction.
Notification of Change (NOC)
Notification from a customer's bank that account information provided with a specific check
transaction was incorrect.
O
Originating Depository Financial Institution (ODFI) A term used to describe the merchant's bank.
Originator For Payment Processors, this generally refers to the merchant.
P
Payment Gateway
A terminal that allows merchants to electronically and typically provides merchants with
management, reporting, and recurring billing services.
Personal Identification Number (PIN)
A distinct number generally used for authenticating the user's identity and allowing access to
accounts or information.
Point of Sale (POS) and Point of Sale Device
Generally refers to a physical location where a payment transaction takes place. The Point of
Sale devices range from swipe terminals to PDA's.
Prearranged Payment and Deposit Entry (PPD)
This SEC code (Standard Entry Class Code) is used for pre-arranged payments where a signed
authorization by the consumer is arranged. It is also used for issuing refunds to consumer
accounts that originated from an authorization via the telephone.
R
Reconciliation
The process of comparing the transaction activity of all parties involved to align transaction
or account activity. This process verifies that no transaction activity is being unaccounted for
by any of the participating parties.
Recurring Billing Transaction
A transaction that recurs on a predetermined time period. Common billing types are membership
fees, subscriptions or bill payments.
Refund
A credit issued to a customer's bank account.
Regulation D
Established by the Federal Reserve Board, Regulation D defines the types of deposits handled by
financial institutions.
Regulation E
Part of the Electronic Funds Transfer Act as established by the Federal Reserve Board. Regulation
E defines electronic funds transfers.
Reseller
An Independent Sales Organization (ISO) or Merchant Service Provider (MSP) that acquires
customers for payment processing services.
Response Code
A code issued by a bank that indicates the results of a transaction attempt.
Return or Returned Item
A check transaction that could not be completely processed for reasons such as NSF or account
closed. Refer to our Return Codes for a complete list of return codes and their meaning.
Reversal
A reversed chargeback or refund transaction. This is why it is vital that authorizations are
stored for the required 2 years and are fully in compliance with the rules that govern that
particular type of transaction (NACHA, FTC, FCC) A merchant who shows sufficient proof that an
authorization was valid may have that chargeback reversed.
Risk Reserve
A reserve fund held to cover potential costs incurred from returns or chargeback transactions
S
SEC Codes
Standard Entry Class Codes are the codes assigned to transactions to identify the type of
transaction submitted to the ACH Network. Examples are TEL, WEB, ARC, RCK, and PPD.
Stored-Value Card
A pre-paid card that works like a debit card once funds are loaded on the card by the cardholder
T
Telephone-Initiated Entry (TEL)
A single-entry transaction against a customer checking or savings account. TEL transactions may
only be originated when a business relationship between the merchant and the customer already
exists or has existed within the last two years Customer-initiated calls also qualify as TEL
transactions.
Transaction
A debit or credit issued to a checking or savings account.
Transaction ID (Trans ID)
A unique identification value assigned to each transaction.
Truncation
The conversion of a paper check to a substitute check for EFT transfer
U
Underwriting
The process of evaluating an applicant's financial history and credit trustworthiness
V
Virtual Terminal
A Merchant Resource Portal for key-entry transactions.
Void
Used to cancel original transactions that have not yet been submitted for processing.
W
Wire Transfer
A type of electronic fund transfer that guarantees immediate available funds or same day
settlement. The payments are conducted on the Federal Reserve System's federal wire (Fed Wire)
network
Wireless Data Service
A wireless service that allows merchants to transmit payment information via their cell phone or
other enabled wireless device.
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